Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.22.2.2
Leases
6 Months Ended
Jul. 31, 2022
Leases [Abstract]  
Leases

8. Leases

The Company leases certain office space and equipment and determines if an arrangement is a lease at inception. ROU assets for operating leases are included in the deposits and other assets caption and ROU assets associated with finance leases are included within the property and equipment, net caption of the condensed consolidated balance sheet. The current portions of operating and finance lease liabilities are included in the other current liabilities caption and the long-term portion of operating lease liabilities is presented in the other long-term liabilities payable caption of the condensed consolidated balance sheet.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The ROU asset is adjusted for any lease payments made and excludes lease incentives and initial direct costs incurred. If the leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses quoted interest rates obtained from financial institutions as an input to derive its incremental borrowing rate as the discount rate for the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines lease and non-lease components.

The Company leases office space under the terms of noncancelable operating leases that expire at various dates through November 2026. Certain operating lease agreements provide for an annual 2.75% escalation of the base rent. The Company is also responsible for operating expenses, which are classified as variable lease costs. Lease terms may include options to extend or terminate the lease, typically at the Company’s own discretion. Renewal options are regularly evaluated and the renewal period will be included in the lease term when exercise of the renewal option is considered reasonably certain. There are no active leases that have a renewal option that is reasonably certain of being exercised.

The Company holds leases that include both lease (e.g., payments including rent, taxes, and insurance costs) and non-lease components (e.g., common-area or other maintenance costs). As the Company has elected the practical expedient to group lease and non-lease components for all leases, these are accounted for as a single lease component. The Company's leases do not include any residual value guarantees or material restrictive covenants.

Lease expense for both operating and finance leases is recognized on a straight-line basis over the lease term and is recorded in operating expenses on the condensed consolidated statements of operations. Interest expense incurred on finance lease liabilities is calculated using the effective interest method and is recorded in interest expense on the condensed consolidated statements of operations.

In March 2022, the Company entered into a lease agreement to lease certain computer and technology equipment, which has not commenced. Upon commencement, we do not believe the ROU asset will be material. The Company does not have control over the construction or design of these assets.

The lease balances are located in the following positions on the condensed consolidated balance sheet:

 

 

 

Balance Sheet Location

 

July 31, 2022

 

Assets

 

 

 

 

 

Operating

 

Deposits and other assets

 

$

2,197

 

Financing

 

Property and equipment, net

 

 

136

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current

 

 

 

 

 

Operating

 

Other current liabilities

 

$

689

 

Financing

 

Other current liabilities

 

 

93

 

Non-current

 

 

 

 

 

Operating

 

Other long-term liabilities

 

 

2,355

 

Financing

 

 

 

 

-

 

 

Total lease costs for the three and six months ended July 31, 2022 were:

 

 

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

 

July 31, 2022

 

 

 

July 31, 2022

 

Operating lease cost

 

 

$

239

 

 

 

$

605

 

Short-term lease cost

 

 

 

641

 

 

 

 

1,183

 

Variable lease cost

 

 

 

(4

)

 

 

 

44

 

Finance lease cost:

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

 

 

23

 

 

 

 

45

 

Interest on lease liabilities

 

 

 

1

 

 

 

 

3

 

Total finance lease cost

 

 

$

24

 

 

 

$

48

 

 

The following table summarizes future scheduled lease payments as of July 31, 2022:

 

 

 

 

Operating Leases

 

 

 

Finance Leases

 

Remaining six months of fiscal 2023

 

 

$

479

 

 

 

$

 

2024

 

 

 

755

 

 

 

 

96

 

2025

 

 

 

775

 

 

 

 

-

 

2026

 

 

 

797

 

 

 

 

-

 

2027

 

 

 

658

 

 

 

 

-

 

Total

 

 

 

3,464

 

 

 

 

96

 

Less: Imputed Interest

 

 

 

420

 

 

 

 

3

 

Present value of net lease payments

 

 

$

3,044

 

 

 

$

93

 

 

 

 

 

 

 

 

 

 

Lease liability, current portion

 

 

$

689

 

 

 

$

93

 

Lease liability, net of current portion

 

 

 

2,355

 

 

 

 

-

 

Total lease liability

 

 

$

3,044

 

 

 

$

93

 

 

Supplemental information and non-cash activities related to operating and finance leases are as follows:

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

Operating cash flows from operating leases

 

 

$

699

 

Operating cash flows from finance leases

 

 

 

3

 

Financing cash flows from finance leases

 

 

 

96

 

 

 

 

$

798

 

Weighted average remaining lease term (in years)

 

 

 

 

Operating leases

 

 

 

4.19

 

Finance leases

 

 

 

1.50

 

Weighted average discount rate

 

 

 

 

Operating leases

 

 

 

6.30

%

Finance leases

 

 

 

5.67

%

 

Disclosures Related to Periods Prior to Adoption of the New Lease Standard

The Company recorded rent expense of $297 and $592 for the three and six months ended July 31, 2021, respectively.

The minimum aggregate future obligations under noncancelable operating leases as of January 31, 2022 were as follows:

 

Year ending January 31,

 

 

 

 

2023

 

 

$

1,025

 

2024

 

 

 

755

 

2025

 

 

 

775

 

2026

 

 

 

797

 

2027

 

 

 

658

 

 

 

 

$

4,010

 

As the Company did not hold finance leases as of January 31, 2022, there were no future minimum lease payments under finance leases at that time.